As today’s brutal day on Wall Street spills overseas to a downer Far East market, how do you like that Republican gun-to-your-head debt ceiling deal now?
From Sunday’s New York Times, this pearl of wisdom: “It is far too simplistic to blame the loose coalition of Republicans known as the Tea Party for the debt-limit debacle. It was not the Tea Party fringe of the Republican Party that dragged the economy to the brink — it was its center. The party has moved so far to the right that there is little difference between fringe and mainstream.
Through a combination of fear and fervor, Republican leaders in Congress and in the presidential campaign have lined up behind a radical new strategy in which all major decisions are made under threat — to shut the government in April, to implode the economy in July, to cut off money for the Federal Aviation Administration in August. Party leaders have said they will do this again and again, in perpetuity.
The Tea Party did not come up with this strategy. Although several of its elected members said they would never vote to raise the debt ceiling, it was John Boehner, the House speaker, who in May devised the fatal formula that President Obama would have to agree to cut more from spending than the amount of the debt-limit increase. This nonsense finally won the day. (Mr. Boehner was pilloried by Tea Party branches for raising the debt limit at all.)”
And it’s clear, the free market reacted not in the way Republicans and Libertarians thought it would with an all-cuts offering. Also from Sunday’s NY Times, a call for some tax increases to offset spending cuts ($100 billion just for cutting oil subsidies to an insanely profitable industry that doesn’t need it). Read the whole story here.
From the piece: “A week later and we are still amazed at how the Republicans in Congress pulled it off. They held the economy hostage, won some cheap political points, and all of us will spend the next decade paying the ransom as government programs — $900 billion over 10 years in the first round — are slashed and the recovery is put at risk.
Under the terms of the ill-conceived debt agreement, Congress has to propose another $1.5 trillion in deficit reduction measures by December. Just to ensure that rationality does not have a chance, Republican leaders said they would not put anyone on the deficit-cutting “super-committee” who might entertain the idea of raising taxes.
A week later and we are even more amazed by the failure of Mr. Obama and the Democratic leadership to stand up to this intransigence. If they do not start pushing back, with the same ferocity, the results will be disastrous.
Standard & Poor’s made its judgment about both the political standoff and the all-cuts, no-new-revenues deal on Friday when it lowered the country’s long-term debt rating one notch, down from AAA. And while “no new taxes” pledges are almost always big political winners, Americans are also figuring out that the country cannot keep on this way. According to the latest New York Times/CBS News Poll, 63 percent support raising taxes on households that earn more than $250,000 a year to help address the deficit.
If that is not enough to energize the White House, here are a few more facts. To avoid across-the-board cuts, Congress must enact at least another $1.2 trillion in deficit reduction measures over the 10 years. For all of the talk of “big government,” there is no way to cut that much in discretionary programs without crippling basic functions. Lawmakers could eliminate the Federal Bureau of Investigation, Pell Grants, the Centers for Disease Control and Prevention, the National Institutes of Health and Head Start and still not cut $110 billion annually.
Entitlement reform is essential. But it is unlikely that lawmakers will agree on deep cuts to Medicare, Medicaid and Social Security. Finally, asserting that deficits can be tamed with spending cuts alone ignores that the Bush tax cuts — costing $1.8 trillion from 2002 to 2009 — are a big reason we got into this deep hole.
Here is the bottom line. There is no economically sensible or politically honest way to address the deficit without also increasing revenues and reforming the tax code.”
Our Libertarian friends at the Register extoll the free markets as the way to go and right now, the free market is headed towards a cliff. The majority of the American public blames the Republican leadership in the House for this debacle. Please research the Recession of 1937 if you think this has never happened before.